Virginia program cuts costs of health insurance under Obamacare

Virginia's innovative reinsurance program for health coverage is reducing the monthly bill for each person covered by an Obamacare policy by nearly $100 a month, the State Corporation Commission reports.

The state program reimburses health insurers for some of the costs of relatively large claims for payment from the hospitals, physicians and other health care providers treating policyholders.

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By doing this, the SCC projects average monthly bills this year will be $519 for each covered individual, compared with $617 if the program were not in place.

That's pretty much in line with Virginia's experience since the program started in 2023.

Last year, average monthly premiums were $483.15 per person, but would have been $577.63 without the reinsurance, the SCC reported.

In 2023, average premiums were $495.26, compared with $598.16 without the reinsurance.

That year, Virginians covered by Affordable Care Act policies saw their bills drop on average $74 a month from 2022's average. Without the program, monthly premiums would have climbed by $29.

"The reinsurance program is exceeding expectations," said Del. Mark Sickles, D-Fairfax, who sponsored the legislation establishing the program.

"It has made a substantial contribution to our historically low uninsured rate," he added.

The program aims to cut individuals' premiums by about 15% from what they would otherwise be.

State and US funds

It uses state and federal funds — in fiscal year 2025, that will be $331.9 million in federal money, since the program is headed for a surplus that is returning $25 million to the state, the state budget shows.

In return for this year's $331.9 million cost, Virginians will this year save nearly $514 million in health insurance premiums, a Richmond Times-Dispatch analysis of the SCC data shows.

Next year, the state's $20.5 million will bring down $481.9 million for the program.

But there's a gain for the federal government from the program, Sickles said.

Since it holds down the cost of insurance, it's helped lower the cost to the federal government of the Affordable Care Act tax credits that cut costs for lower- and moderate-income policyholders, Sickles said.

Roughly 86% of Virginians with Obamacare coverage use the credits to hold down the cost of premiums.

The reinsurance reimburses health insurers for part of the cost of claims between $40,000 and a $155,000 cap, so that the insurers are out of pocket for 70% of the cost.

Doing this is bringing coverage within the reach of more people. The number of Virginians buying Obamacare coverage increased by nearly 29,000 to 436,800, as the number who can further reduce premiums by applying the Affordable Care Act's tax credits jumped by nearly 46,000.

At the same time, more Virginians are shifting to Obamacare policies that cover more of their out-of-pocket expenses, although these cost more than the low-cost "bronze" coverages, where premiums are calculated with the assumption that the policyholder will pay 40% of the cost of care.

"We believe the CHRP (Commonwealth Health Reinsurance Program) continues to make a substantial positive impact, meeting its goal of making coverage more affordable by lowering premiums in the individual market," said SCC Commissioner of Insurance Scott White.

The impact is particularly striking for people with incomes too high to qualify for Affordable Care Act tax credits, he noted.

The credits are available for people with incomes just above the level where they can get Medicaid to those earning up to 400% of the federal poverty line, or an annual income of $106,000 for a family of three.

Subsidies from the credit can be substantial — for a family of three with incomes of up to about $40,770, the subsidy covers the cost of Obamacare insurance premiums, a Kaiser Family Foundation calculator shows. If that family's income was at Richmond's median household level — the point at which half of households earn less and half more — the subsidy covers about 71% of the bill.